Shell's Rig Move Timed to Avoid State Tax

The Kulluk drillship remained aground Jan. 5 on the southeast shoreline of Sitkalidak Island, Alaska, upright and stable, and Shell has received a state permit to move it, the Unified Command reported.

Jan 05, 2013

The Independent, a British newspaper, reported Jan. 5 that Shell was moving the drillship Kulluk from Alaskan waters to the port of Seattle, Wash., just before the end of 2012 in order to avoid at least $6 million in Alaska state taxes. The Kulluk was in tow in high seas and high winds when the towlines failed, and it grounded on the southeast shoreline of Sitkalidak Island, Alaska, about 9 p.m. local time Dec. 31, where it remained Jan. 5.

"The rig was beached during a violent storm on its way to a Seattle shipyard for routine maintenance, in a round-trip timed so that, thanks to an accounting loophole, Shell could avoid an Alaskan state tax. However, because the rig ran aground late on New Year's Eve and began 2013 within three miles of the Alaskan coast, Shell remains liable for a unique state property tax on equipment dedicated to oil and gas development and exploration," the newspaper reported, adding that a Shell spokesman confirmed the tax structure influenced the timing of the move, while a second company spokesman insisted it was driven by safety -– because two weeks of favorable weather were forecast for the trip. (http://www.independent.co.uk/news/world/americas/new-twist-in-stricken-rig-saga-shell-was-moving-it-to-avoid-tax-8439128.html)

The Jan. 5 report posted by the Unified Command overseeing the Kulluk response said the drillship remains upright and stable. Shell has received a permit from Alaska Department of Natural Resources to remove it, and Unified Command has negotiated with the Old Harbor Native Corporation to secure access to the shoreline near the Kulluk, the report states. It also said two C-130 flights completed between Anchorage and Kodiak delivered response equipment.